Shut savings accounts that are being targeted in the rate cut frenzy

Banks and building societies have been cutting the rates that they are willing to pay to new savers for months.

Now they have turned their attention on loyal customers in former best buys that are now closed to new savers.

Intelligent Finance, where the deposit taker is Halifax, Scottish Widows, which is part of Lloyds, Britannia, owned by Co-op, and the Post Office, where the deposit taker is Bank of Ireland, have all taken the knife to rates they pay loyal savers.

Money to burn: Some rates have been cut by a huge 0.55 percentage points after tax

Building societies that have joined in the cutting frenzy include Leeds, Manchester, Newcastle, Melton Mowbray, Saffron and Skipton.

Some rates have been cut by a huge 0.55 percentage points after tax (0.69 points before). Others are not far behind in the size of their cuts.

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Accounts paying decent rates this time last year are the main target. The big banks, including Halifax, Lloyds TSB, HSBC and NatWest, have less room for manoeuvre on the rates they can offer on their accounts.

They have already cut their rates to the bone and have paid as little as 0.08 per cent (0.1 per cent) on some of their closed accounts for nearly four years.

Susan Hannums, director of Savingschampion.co.uk, which tracks changes in accounts, warns: ‘The rise in the number of providers cutting rates for their existing customers means no saver is immune as we expect this trend to continue. Savers need to remain vigilant and move their money once the accounts become uncompetitive.’

The Government’s Funding For Lending scheme has had a knock-on effect on interest rates that banks and building societies are willing to pay savers.

SAVINGS DOS AND DON'TS by Amy Andrew

DO ditch and switch after introductory bonus rates

DO watch out for rate changes - some banks suck you in with a high rate and try to flog another, similarly-named, account which offers less interest.

DO know your account's exact name and the interest rate it pays.

DON'T get caught out by penalties - avoid charges for exceeding withdrawal limits or not giving notice enough notice when you want to take out cash - you could end up forfeiting interest on the whole account for that month

DO factor in the tax you'll pay on savings - banks quote one of two different interest rates. The gross rate is the flat amount paid while the Annual Equivalent Rate (AER) takes into account interest compounded over the year.

If you are in a stable relationship DO consider which name your account is in if one person earns less and is in a lower tax bracket. There are no laws against this.

This scheme provides them with a cheap source of money to lend to borrowers.

But it means they are no longer so dependent on savers — so they have been cutting the rates they are willing to pay. Simon Rose, from campaign group Save Our Savers, says: ‘At no time did the Government consider the effect of this scheme on savers. All it is doing is beggaring savers.’

M&S Money closed its Advantage Cash Isa paying 2.75 per cent tax-free to new M&S savers on Monday — although those who already have a savings account with M&S Money can still open an account.

But on March 6 it will cut the rate to 2.25 per cent — a 0.5 percentage fall. Intelligent Finance will cut rates by up to 0.69 percentage points from February 9.

Its Cash Isa rate falls to 1.81 per cent tax-free, down from 2.5 per cent, while its Isaver internet account drops from 1.99 per cent (2.49 per cent) to 1.44 per cent (1.8 per cent).

Britannia Select Access Saver 1 account holders, who are limited to four free withdrawals a year, saw their rate cut by 0.4 (0.5) percentage points to 1.4 per cent (1.75 per cent) from 1.8 per cent (2.25 per cent) last week.

Leeds BS, the fifth largest, cut the rate on its Postal Access account to 1.84 per cent (2.3 per cent) from the 2.32 per cent (2.9 per cent) it paid when it launched the account last March.

Its Unlimited Access Postal account Issue 2, paying 2.2 per cent (2.75 per cent) at launch last May, now pays 1.84 per cent (2.3 per cent) following cuts earlier this month.

Scottish Widows’ loyal savers have seen the underlying rate on Internet Saver, Instant Saver and E-Cash Isa accounts tumble. Instant Saver now pays 1.91 per cent (2.39 per cent) including the 0.55 (0.69) percentage point bonus for a year, down from 2.08 per cent (2.6 per cent). Once the bonus runs out you earn 1.36 per cent (1.7 per cent).